The Securities and Exchange Commission (SEC) today announced charges against registered broker-dealer First Horizon Advisors, Inc. for failing to maintain and enforce policies and procedures reasonably designed to achieve compliance with the Best Interests Regulation (Reg BI).
The charges relate to First Horizon’s recommendations for a type of derivative security called a structured note.
First Horizon agreed to pay a $325,000 civil penalty to resolve the SEC’s charges.
The SEC order finds that First Horizon failed to comply with Reg BI policies and procedures in several ways.
For example, in 2021, First Horizon transferred more than 5,000 client brokerage accounts to its system from a broker representative with which First Horizon had merged. Due to incompatibilities in the two systems, First Horizon did not have accurate customer information necessary to review the structured note recommendations for compliance with First Horizon’s Reg BI policies and procedures.
In addition, registered dealers who joined First Horizon from the merging broker-dealer did not have access to First Horizon’s exception reporting website to review structured note transactions flagged as non-compliant as required by its Reg BI policies and procedures First Horizon.
The SEC order also finds that, in 2023, the company approved structured note recommendations without all the documentation required by its Reg BI policies and procedures.
The SEC order finds that First Horizon breached the Reg BI Compliance Obligation. Without admitting or denying the SEC’s findings, First Horizon agreed to a cease and desist order, a reprimand and the aforementioned civil penalty.